Tablets are eating cheap PCs alive.
Thursday during a conference call, Nvidia Chief Executive Jen-Hsun Huang said that consumers are turning to tablets instead of purchasing cheap PCs, even more so now that Microsoft's own Surface tablet and Windows RT are now available on the market. He indicated that consumers are beginning to realize that a top-notch tablet with solid features is better than a cheap PC with sub-par components.
"These days, tablets are so versatile, transformable," Huang said. "Now with Microsoft Surface and Windows RT, the distinction between a tablet and a cheap notebook has all but disappeared.... The future of cheap PCs is tablets."
He went on to note that Nvidia's own tablet business has doubled from the previous year, and its overall SoC business grew 50-percent in the same timeframe. The company is now expecting to ship some 30 million Tegra chips in 2012 alone. Even more, mobile chips like Nvidia's Tegra will likely take overall computing share from the low-end PC market.
"Windows RT is a monumental event for the PC industry," he told CNET in an interview. "This is really about making the PC modern, because now it's transformable into a tablet as well as being a full PC. And it's incredibly mobile. The battery life is fantastic. Industrial design is fantastic. Windows RT is really about creating the modern PC. Once you touch it, feel it, enjoy it, you realize in just a few clicks that this is going to be the way PCs get built."
Thanks to Windows RT, Nvidia is entering the Windows desktop arena not with the launch of a new GPU (which typically isn't offered in low-end PCs due to their cost), but as an ARM-based chip supplier with processor and GPU cores crammed in a single, centralized solution. The company is now on the same playing field as Intel and AMD who also offer low-power solutions for mobile computing.
"Our view of the PC [total addressable market] is it's being eaten by tablets," Huang said.
On Thursday Nvidia reported record revenue of $1.20 billion for the third quarter of fiscal 2013 which ended October 28. Revenues were up 15.3-percent from the previous quarter, and up 12.9-percent from a year earlier. This may be partly due to an increased number of Tegra chips being used in the second half of 2012 thanks to Google's Nexus 7 and other Tegra 3-based tablets and mobile devices.
Nvidia said that revenue is expected to be between $1.025 billion and $1.175 billion in the fourth quarter of fiscal 2013. GAAP and non-GAAP gross margins are expected to be flat relative to the prior quarter, 52.9 percent and 53.1 percent, respectively. GAAP operating expenses are expected to be approximately $400 million; non-GAAP operating expenses are expected to be approximately $359 million.